JOHANNESBURG (Reuters) – South Africa’s biggest grocery retailer, Shoprite, has agreed to sell its furniture business including the OK Furniture and House & Home brands to discount retailer Pepkor, the companies said on Tuesday.
“The purchase consideration represents about 4% of Pepkor’s market capitalisation and will be settled in cash,” Pepkor, whose market value was 80.49 billion rand ($4.50 billion) on Monday, said in a statement.
That suggests a price about 3.2 billion rand ($179 million).
Pepkor will get a business operating more than 400 stores in South Africa, Botswana, Lesotho, Namibia, Eswatini and Zambia. The deal excludes the Angola and Mozambique operations.
It also includes the Shoprite Furniture credit loan book and related insurance arrangements in addition to inventory and certain fixed assets, Pepkor said.
Shoprite CEO Pieter Engelbrecht said in a separate statement that the supermarket group wanted to focus on its core grocery operations.
“We found ourselves at a crossroad with the business’s future growth and profitability hamstrung by the requirement of a level of investment that would have resulted in us re-directing capital and project management resources away from that currently dedicated to our food retail operations,” he said.
Shoprite’s furniture business contributed 7.2 billion rand or 3% to Shoprite’s group last full-year sales of 240.7 billion rand.
Pepkor already runs a Lifestyle business unit that comprises six household furniture, appliances and consumer electronics retail brands.
“The proposed transaction will allow Pepkor to expand its value proposition through a complementary product mix in furniture, bedding, appliances and consumer electronics, while also expanding its presence in under-represented regions,” it said.
($1 = 17.8907 rand)
(Reporting by Nqobile Dludla, Editing by Louise Heavens and Mark Potter)
